Investing in small cap stocks can be a harrowing experience. Smaller companies tend to shift in larger moves, rising and falling more than blue chips would be expected to. Tech, also, presents a more volatile sector for investments than others.
For firms trading largely on things like software or services, demand can fluctuate rapidly and without much warning. What’s a necessity one day can quickly become obsolete, and one great new idea can turn a company into a major profit engine almost overnight.
So why invest in small cap? If both the size and sector points towards increased volatility, wouldn’t money be better invested somewhere with more predictable returns? Well, while there’s wisdom in that approach, it’s also true that tech’s wild swings, when they’re in the right direction, can offer better returns than would be found elsewhere. Provided that one can pick the right stocks, small cap tech stocks can be extremely lucrative.
Of course, as always, knowing which stocks to jump into is not so easy. For the most part, the best ideas will win out over time in the, and it’s not easy to know which way the market trends will go. Another approach might be to invest in those companies that offer the most bullish valuations. So, here are five small-cap tech companies that, on paper, offer some attractive reasons for investing. Each company has a PEG under 1, meaning that they’re attractive priced based on their earnings and projected growth. They also each have a ratio of price to free cash flow that’s under 15, meaning that they’re priced well for the amount of money they’re bringing in. Finally, each stock is on the rise, gaining 15 percent of more in the last quarter.
Market Cap: $843.97 million PEG: 0.92 P/FCF: 12.82 Gain this Quarter: 15.17 percent
Ebix provides a range of software solutions to the insurance industry, drawing 71 percent of its revenues from on-demand insurance Exchanges.
Brooks Automation (BRKS)
Market Cap: $797.67 million PEG: 0.40 P/FCF: 12.65 Gain this Quarter: 20.54 percent
Brooks provides vacuum, instrumentation, and automation services to markets where equipment availability, efficiency, and productivity are a crucial factor for success.
Kulicke and Soffa Industries (KLIC)
Market Cap: $875.07 million PEG: 0.53 P/FCF: 4.23 Gain this Quarter: 28.05 percent
Kulicke and Soffa makes expendable tools and capital equipment used in the creation of semiconductor devices.
Vishay Intertechnology (VSH)
Market Cap: $1.89 billion PEG: 0.70 P/FCF: 9.03 Gain this Quarter: 28.06 percent
Vishay Intertechnology manufactures semiconductors and passive components for the global market.
Insight Enterprises (NSIT)
Market Cap: $941.42 million PEG: 0.65 P/FCF: 10.57 Gain this Quarter: 38.20 percent
Insight is a provider of informationsoftware, hardware, and services for clients in the business and public sector.